The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Talk about biting the hand that fed you.

The ink has barely dried on the Treasury Department's final sale of American International Group shares, and now it appears the insurer is considering joining former CEO Maurice (Hank) Greenberg's shareholder suit against Uncle Sam.

DealBook reported late Monday that AIG's board will meet Wednesday to consider whether or not to join the shareholder lawsuit, and take on the government that finally extricated itself from the insurer after more than four years of involvement.

The choice of whether or not to get engaged is hardly easy for the board. As DealBook points out:

Its board members, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. If the board does not give careful consideration to the case, Mr. Greenberg could challenge its decision to abstain.

Should Mr. Greenberg snare a major settlement without A.I.G., the company could face additional lawsuits from other shareholders. Suing the government would not only placate the 87-year-old former chief, but would put A.I.G. in line for a potential payout.

Greenberg's suit also alleges that in order to repay the government bailout, AIG was forced to unload several of its most prized assets, including its lucrative business in Asia, AIA. The terms of the rescue, rather than its necessity, is the crux of the argument.

AIG's board finds itself in a difficult position, but the stance of Chief Executive Robert Benmosche will be fascinating to watch. Benmosche, who managed to stabilize AIG after coming on board in August 2009 before leading the restructuring, chafed under the government's yoke early on. The executive took issue with the sharp limits on executive compensation, and made sure to tout the fact that the Treasury Department reported a $22.7 billion profit on its AIG investment after selling its remaining shares in December.

With AIG in the midst of an ad campaign with a "Thank You America" tagline, joining Greenberg's lawsuit may be the prudent way for the board to meet its obligations to investors, but it surely won't play well in the court of public opinion.

AIG and the Treasury Department declined to comment for this story.

Shares of AIG were little changed before the open, down just over 0.1%.